UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D. C. 20549 |
North Carolina | 13-3951308 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
1441 Gardiner Lane, Louisville, Kentucky | 40,213 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (502) 874-8300 | ||
Former name or former address, if changed since last report: N/A |
(c) | Exhibits |
99.1 | Press Release dated July 13, 2011 from YUM! Brands, Inc. |
YUM! BRANDS, INC. | ||||
(Registrant) |
Date: | July 13, 2011 | /s/ David E. Russell | ||
Vice President, Corporate Controller | ||||
(Principal Accounting Officer) |
• | Operating profit grew 25% in China and 11% at Yum! Restaurants International (“YRI”), prior to foreign currency translation. Operating profit declined 28% in the U.S., resulting in a Worldwide operating profit decline of 2%, prior to foreign currency translation. Worldwide operating profit increased 3% after foreign currency translation. |
• | Worldwide system sales grew 3%, prior to foreign currency translation, including 28% in China and 6% at YRI. System sales in the U.S. declined 5%. |
• | Strong international development continued with 241 new restaurants opened, including 99 new units in China. |
• | Same-store sales grew 18% in China and 2% at YRI, and declined 4% in the U.S. |
• | Worldwide restaurant margin declined 0.6 percentage points to 15.9%. |
• | Worldwide effective tax rate, prior to Special Items, declined to 16.7% from 23.6%. |
• | Share repurchases totaled $166 million for 3.2 million shares at an average price of $52 per share. Share repurchases totaled $308 million year-to-date. |
Second Quarter | Year-to-Date | |||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |
EPS Excluding Special Items | $0.66 | $0.58 | 13% | $1.29 | $1.17 | 10% |
Special Items Gain/(Loss)1 | $(0.01) | $0.01 | NM | $(0.09) | $(0.08) | NM |
EPS | $0.65 | $0.59 | 10% | $1.20 | $1.09 | 10% |
Second Quarter | Year-to-Date | |||||||
% Change | % Change | |||||||
2011 | 2010 | Reported | Ex F/X | 2011 | 2010 | Reported | Ex F/X | |
System Sales Growth | +34 | +28 | +31 | +26 | ||||
Same-Store Sales Growth (%) | +18 | +4 | NM | NM | +16 | +4 | NM | NM |
Restaurant Margin (%) | 19.7 | 20.2 | (0.5) | (0.5) | 22.0 | 23.0 | (1.0) | (1.0) |
Operating Profit ($MM) | 182 | 139 | +31 | +25 | 397 | 315 | +26 | +21 |
• | China Division system sales increased 28%, excluding foreign currency translation, driven by same-store sales growth of 18% and new unit development. The same-store sales growth was driven by a 21% increase in same-store transactions. | |
○ | KFC same-store sales grew 17%. | |
○ | Pizza Hut Casual Dining same-store sales grew 22%, marking its sixth consecutive quarter of double-digit same-store sales growth. | |
○ | 99 new restaurants opened in the second quarter. | |
China Units | Q2 2011 | % Change1 |
Traditional Restaurants | 4,066 | +13 |
KFC | 3,378 | +13 |
Pizza Hut Casual Dining | 544 | +16 |
Pizza Hut Home Service | 121 | +16 |
1 Annual Rate of Change |
• | Restaurant margin decreased 0.5 percentage points, driven primarily by higher wage rates and commodity inflation. We now estimate commodity inflation of approximately 9% for the full year. |
• | Operating profit growth of 25% overlapped growth of 33% last year, excluding foreign currency translation. |
• | Foreign currency translation positively impacted operating profit by $9 million. |
Second Quarter | Year-to-Date | |||||||
% Change | % Change | |||||||
2011 | 2010 | Reported | Ex F/X | 2011 | 2010 | Reported | Ex F/X | |
Traditional Restaurants | 14,387 | 13,915 | +3 | NA | 14,387 | 13,915 | +3 | NA |
System Sales Growth | +13 | +6 | +11 | +6 | ||||
Franchise & License Fees | 189 | 159 | +18 | +12 | 378 | 328 | +15 | +10 |
Operating Profit ($MM) | 145 | 122 | +19 | +11 | 303 | 263 | +15 | +9 |
Operating Margin (%) | 19.3 | 17.6 | 1.7 | 1.6 | 21.4 | 18.8 | 2.6 | 2.3 |
• | YRI Division system sales growth of 6%, excluding foreign currency translation, was driven by new unit development and same-store sales growth of 2%. | |
○ | Emerging markets led the way with 11% system sales growth, driven by 5% unit growth. | |
○ | Developed market system sales grew 4%, including 2% unit growth. | |
• | YRI opened 142 new units in 37 countries, including 72 new units in emerging markets. Our franchise partners opened 89% of the total new units. | |
• | Operating profit grew 11%, prior to foreign currency translation, as emerging market strength, led by Thailand, and significant gains in France offset weak performance from Pizza Hut in the U.K. | |
• | Restaurant margin increased 2 percentage points to 12.7%. | |
• | Foreign currency translation positively impacted operating profit by $10 million. |
Key YRI Markets | System Sales Ex F/X | ||
Percent of YRI1 | Second Quarter Growth (%) | Year-to-Date Growth (%) | |
Franchise Only Markets | |||
Asia (ex China Division)2 | 26% | +3 | +4 |
Latin America | 11% | +9 | +8 |
Middle East | 8% | +9 | +9 |
Continental Europe | 7% | +3 | +3 |
Canada | 7% | (6) | (3) |
Africa | 5% | +12 | +12 |
Company/Franchise Markets | |||
UK3 | 14% | +1 | +1 |
Australia/New Zealand | 10% | +4 | +2 |
Thailand | 2% | +21 | +22 |
Key Growth Markets | |||
France | 4% | +33 | +26 |
Germany/Netherlands | 2% | +12 | +14 |
India | 1% | +44 | +43 |
Russia | 1% | +19 | +18 |
1 | Percentage of Total YRI System Sales for Full Year 2010. |
2 | Includes the impact of the earthquake in Japan as that event fell within YRI's reported second quarter. Excluding Japan, Asia system sales grew 6% for the quarter and 7% year-to-date. |
3 | KFC UK system sales grew 6% for the quarter and 5% year-to-date; Pizza Hut UK system sales declined 7% for the quarter and year-to-date. |
Second Quarter | Year-to-Date | |||||
2011 | 2010 | % Change | 2011 | 2010 | % Change | |
Same-Store Sales Growth (%) | (4) | Even | NM | (2) | Even | NM |
Restaurant Margin (%) | 11.7 | 16.1 | (4.4) | 11.2 | 14.2 | (3.0) |
Franchise and License Fees ($MM) | 180 | 183 | (1) | 352 | 353 | — |
Operating Profit ($MM) | 132 | 184 | (28) | 255 | 327 | (22) |
Operating Margin (%) | 15.0 | 18.6 | (3.6) | 14.8 | 17.0 | (2.2) |
• | U.S. Division same-store sales declined 4% including declines of 5% at Taco Bell, 2% at Pizza Hut, and 5% at KFC. |
• | Restaurant margin declined 4.4 percentage points and operating profit declined 28% due to $15 million of commodity inflation and a decline in same-store sales. Food inflation remains a headwind and we now estimate commodity inflation of approximately 7% for the full year. |
• | Profit performance is expected to improve by the fourth quarter. |
Analysts are invited to contact | |
Tim Jerzyk, Senior Vice President Investor Relations, at 888/298-6986 | |
Steve Schmitt, Director Investor Relations, at 888/298-6986 | |
Members of the media are invited to contact | |
Amy Sherwood, Vice President Public Relations, at 502/874-8200 |
Quarter | % Change | Year to Date | % Change | ||||||||||||||||
6/11/11 | 6/12/10 | B/(W) | 6/11/11 | 6/12/10 | B/(W) | ||||||||||||||
Company sales | $ | 2,431 | $ | 2,220 | 10 | $ | 4,482 | $ | 4,216 | 6 | |||||||||
Franchise and license fees and income | 385 | 354 | 9 | 759 | 703 | 8 | |||||||||||||
Total revenues | 2,816 | 2,574 | 9 | 5,241 | 4,919 | 7 | |||||||||||||
Company restaurants | |||||||||||||||||||
Food and paper | 792 | 699 | (13) | 1,454 | 1,324 | (10) | |||||||||||||
Payroll and employee benefits | 548 | 503 | (9) | 1,009 | 964 | (5) | |||||||||||||
Occupancy and other operating expenses | 705 | 652 | (8) | 1,273 | 1,222 | (4) | |||||||||||||
Company restaurant expenses | 2,045 | 1,854 | (10) | 3,736 | 3,510 | (6) | |||||||||||||
General and administrative expenses | 308 | 283 | (8) | 563 | 528 | (6) | |||||||||||||
Franchise and license expenses | 33 | 24 | (33) | 63 | 47 | (33) | |||||||||||||
Closures and impairment (income) expenses | 19 | 12 | (64) | 88 | 16 | NM | |||||||||||||
Refranchising (gain) loss | 5 | (10 | ) | NM | 3 | 53 | 95 | ||||||||||||
Other (income) expense | (13 | ) | (10 | ) | 21 | (32 | ) | (20 | ) | 55 | |||||||||
Total costs and expenses, net | 2,397 | 2,153 | (11) | 4,421 | 4,134 | (7) | |||||||||||||
Operating Profit | 419 | 421 | — | 820 | 785 | 5 | |||||||||||||
Interest expense, net | 35 | 42 | 11 | 78 | 83 | 5 | |||||||||||||
Income before income taxes | 384 | 379 | 1 | 742 | 702 | 6 | |||||||||||||
Income tax provision | 62 | 90 | 31 | 153 | 168 | 9 | |||||||||||||
Net income - including noncontrolling interests | 322 | 289 | 11 | 589 | 534 | 10 | |||||||||||||
Net income - noncontrolling interests | 6 | 3 | (60) | 9 | 7 | (25) | |||||||||||||
Net income - YUM! Brands, Inc. | $ | 316 | $ | 286 | 10 | $ | 580 | $ | 527 | 10 | |||||||||
Effective tax rate | 16.4 | % | 23.8 | % | 7.4 ppts. | 20.7 | % | 24.0 | % | 3.3 ppts. | |||||||||
Basic EPS Data | |||||||||||||||||||
EPS | $ | 0.67 | $ | 0.61 | 11 | $ | 1.23 | $ | 1.11 | 10 | |||||||||
Average shares outstanding | 471 | 473 | — | 472 | 474 | — | |||||||||||||
Diluted EPS Data | |||||||||||||||||||
EPS | $ | 0.65 | $ | 0.59 | 10 | $ | 1.20 | $ | 1.09 | 10 | |||||||||
Average shares outstanding | 484 | 485 | — | 485 | 485 | — | |||||||||||||
Dividends declared per common share | $ | 0.50 | $ | 0.21 | $ | 0.50 | $ | 0.42 |
Quarter | % Change | Year to Date | % Change | ||||||||||||||||
6/11/11 | 6/12/10 | B/(W) | 6/11/11 | 6/12/10 | B/(W) | ||||||||||||||
Company sales | $ | 1,164 | $ | 875 | 33 | $ | 2,057 | $ | 1,573 | 31 | |||||||||
Franchise and license fees and income | 16 | 12 | 35 | 29 | 22 | 33 | |||||||||||||
Total revenues | 1,180 | 887 | 33 | 2,086 | 1,595 | 31 | |||||||||||||
Company restaurant expenses, net | |||||||||||||||||||
Food and paper | 397 | 290 | (37) | 706 | 519 | (36) | |||||||||||||
Payroll and employee benefits | 191 | 131 | (46) | 314 | 221 | (42) | |||||||||||||
Occupancy and other operating expenses | 347 | 278 | (25) | 584 | 471 | (24) | |||||||||||||
935 | 699 | (34) | 1,604 | 1,211 | (32) | ||||||||||||||
General and administrative expenses | 67 | 51 | (32) | 104 | 81 | (29) | |||||||||||||
Franchise and license expenses | 1 | — | NM | 1 | — | NM | |||||||||||||
Closures and impairment (income) expenses | 3 | 5 | 36 | 3 | 5 | 36 | |||||||||||||
Other (income) expense | (8 | ) | (7 | ) | 19 | (23 | ) | (17 | ) | 34 | |||||||||
998 | 748 | (33) | 1,689 | 1,280 | (32) | ||||||||||||||
Operating Profit | $ | 182 | $ | 139 | 31 | $ | 397 | $ | 315 | 26 | |||||||||
Company sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Food and paper | 34.1 | 33.1 | (1.0) ppts. | 34.3 | 33.0 | (1.3) ppts. | |||||||||||||
Payroll and employee benefits | 16.4 | 14.9 | (1.5) ppts. | 15.3 | 14.1 | (1.2) ppts. | |||||||||||||
Occupancy and other operating expenses | 29.8 | 31.8 | 2.0 ppts. | 28.4 | 29.9 | 1.5 ppts. | |||||||||||||
Restaurant margin | 19.7 | % | 20.2 | % | (0.5) ppts. | 22.0 | % | 23.0 | % | (1.0) ppts. | |||||||||
Operating margin | 15.4 | % | 15.7 | % | (0.3) ppts. | 19.0 | % | 19.8 | % | (0.8) ppts. |
Quarter | % Change | Year to Date | % Change | ||||||||||||||||
6/11/11 | 6/12/10 | B/(W) | 6/11/11 | 6/12/10 | B/(W) | ||||||||||||||
Company sales | $ | 564 | $ | 534 | 6 | $ | 1,041 | $ | 1,069 | (3) | |||||||||
Franchise and license fees and income | 189 | 159 | 18 | 378 | 328 | 15 | |||||||||||||
Total revenues | 753 | 693 | 9 | 1,419 | 1,397 | 2 | |||||||||||||
Company restaurant expenses, net | |||||||||||||||||||
Food and paper | 179 | 172 | (4) | 327 | 346 | 6 | |||||||||||||
Payroll and employee benefits | 144 | 137 | (6) | 266 | 271 | 2 | |||||||||||||
Occupancy and other operating expenses | 170 | 169 | (1) | 316 | 335 | 6 | |||||||||||||
493 | 478 | (3) | 909 | 952 | 4 | ||||||||||||||
General and administrative expenses | 97 | 86 | (12) | 176 | 164 | (8) | |||||||||||||
Franchise and license expenses | 11 | 6 | (69) | 22 | 15 | (42) | |||||||||||||
Closures and impairment (income) expenses | 7 | 1 | NM | 9 | 3 | NM | |||||||||||||
Other (income) expense | — | — | — | — | — | — | |||||||||||||
608 | 571 | (6) | 1,116 | 1,134 | 2 | ||||||||||||||
Operating Profit | $ | 145 | $ | 122 | 19 | $ | 303 | $ | 263 | 15 | |||||||||
Company sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Food and paper | 31.5 | 32.2 | 0.7 ppts. | 31.4 | 32.4 | 1.0 ppts. | |||||||||||||
Payroll and employee benefits | 25.7 | 25.7 | — | 25.6 | 25.3 | (0.3) ppts. | |||||||||||||
Occupancy and other operating expenses | 30.1 | 31.4 | 1.3 ppts. | 30.3 | 31.3 | 1.0 ppts. | |||||||||||||
Restaurant margin | 12.7 | % | 10.7 | % | 2.0 ppts. | 12.7 | % | 11.0 | % | 1.7 ppts. | |||||||||
Operating margin | 19.3 | % | 17.6 | % | 1.7 ppts. | 21.4 | % | 18.8 | % | 2.6 ppts. |
Quarter | % Change | Year to Date | % Change | ||||||||||||||||
6/11/11 | 6/12/10 | B/(W) | 6/11/11 | 6/12/10 | B/(W) | ||||||||||||||
Company sales | $ | 703 | $ | 811 | (13) | $ | 1,384 | $ | 1,574 | (12) | |||||||||
Franchise and license fees and income | 180 | 183 | (1) | 352 | 353 | — | |||||||||||||
Total revenues | 883 | 994 | (11) | 1,736 | 1,927 | (10) | |||||||||||||
Company restaurant expenses, net | |||||||||||||||||||
Food and paper | 216 | 237 | 8 | 421 | 459 | 8 | |||||||||||||
Payroll and employee benefits | 213 | 235 | 9 | 429 | 472 | 9 | |||||||||||||
Occupancy and other operating expenses | 191 | 208 | 9 | 379 | 419 | 10 | |||||||||||||
620 | 680 | 9 | 1,229 | 1,350 | 9 | ||||||||||||||
General and administrative expenses | 102 | 109 | 7 | 203 | 213 | 5 | |||||||||||||
Franchise and license expenses | 22 | 18 | (21) | 41 | 32 | (29) | |||||||||||||
Closures and impairment (income) expenses | 9 | 6 | (57) | 10 | 8 | (23) | |||||||||||||
Other (income) expense | (2 | ) | (3 | ) | (62) | (2 | ) | (3 | ) | (47) | |||||||||
751 | 810 | 7 | 1,481 | 1,600 | 7 | ||||||||||||||
Operating Profit | $ | 132 | $ | 184 | (28) | $ | 255 | $ | 327 | (22) | |||||||||
Company sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Food and paper | 30.8 | 29.2 | (1.6) ppts. | 30.4 | 29.2 | (1.2) ppts. | |||||||||||||
Payroll and employee benefits | 30.3 | 28.9 | (1.4) ppts. | 31.0 | 30.0 | (1.0) ppts. | |||||||||||||
Occupancy and other operating expenses | 27.2 | 25.8 | (1.4) ppts. | 27.4 | 26.6 | (0.8) ppts. | |||||||||||||
11.7 | % | 16.1 | % | (4.4) ppts. | 11.2 | % | 14.2 | % | (3.0) ppts. | ||||||||||
Operating margin | 15.0 | % | 18.6 | % | (3.6) ppts. | 14.8 | % | 17.0 | % | (2.2) ppts. |
(unaudited) | |||||||
6/11/11 | 12/25/10 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 955 | $ | 1,426 | |||
Accounts and notes receivable, less allowance: $36 in 2011 and $33 in 2010 | 295 | 256 | |||||
Inventories | 173 | 189 | |||||
Prepaid expenses and other current assets | 232 | 269 | |||||
Deferred income taxes | 64 | 61 | |||||
Advertising cooperative assets, restricted | 122 | 112 | |||||
Total Current Assets | 1,841 | 2,313 | |||||
Property, plant and equipment, net of accumulated depreciation and amortization of $3,408 in | |||||||
2011 and $3,273 in 2010 | 3,907 | 3,830 | |||||
Goodwill | 672 | 659 | |||||
Intangible assets, net | 407 | 475 | |||||
Investments in unconsolidated affiliates | 143 | 154 | |||||
Restricted cash | 300 | — | |||||
Other assets | 516 | 519 | |||||
Deferred income taxes | 421 | 366 | |||||
Total Assets | $ | 8,207 | $ | 8,316 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable and other current liabilities | $ | 1,488 | $ | 1,602 | |||
Income taxes payable | 82 | 61 | |||||
Short-term borrowings | 19 | 673 | |||||
Advertising cooperative liabilities | 122 | 112 | |||||
Total Current Liabilities | 1,711 | 2,448 | |||||
Long-term debt | 3,269 | 2,915 | |||||
Other liabilities and deferred credits | 1,339 | 1,284 | |||||
Total Liabilities | 6,319 | 6,647 | |||||
Shareholders' Equity | |||||||
Common stock, no par value, 750 shares authorized; 465 shares and 469 shares issued in | |||||||
2011 and 2010, respectively | — | 86 | |||||
Retained earnings | 1,907 | 1,717 | |||||
Accumulated other comprehensive income (loss) | (102 | ) | (227 | ) | |||
Total Shareholders' Equity - YUM! Brands, Inc. | 1,805 | 1,576 | |||||
Noncontrolling interests | 83 | 93 | |||||
Total Shareholders' Equity | 1,888 | 1,669 | |||||
Total Liabilities and Shareholders' Equity | $ | 8,207 | $ | 8,316 |
Year to date | |||||||
6/11/11 | 6/12/10 | ||||||
Cash Flows - Operating Activities | |||||||
Net income - including noncontrolling interests | $ | 589 | $ | 534 | |||
Depreciation and amortization | 269 | 256 | |||||
Closures and impairment (income) expenses | 88 | 16 | |||||
Refranchising (gain) loss | 3 | 53 | |||||
Contributions to defined benefit pension plans | (11 | ) | (19 | ) | |||
Deferred income taxes | (48 | ) | (78 | ) | |||
Equity income from investments in unconsolidated affiliates | (27 | ) | (20 | ) | |||
Distributions of income received from unconsolidated affiliates | 16 | 8 | |||||
Excess tax benefit from share-based compensation | (22 | ) | (23 | ) | |||
Share-based compensation expense | 26 | 24 | |||||
Changes in accounts and notes receivable | 9 | 28 | |||||
Changes in inventories | 20 | (19 | ) | ||||
Changes in prepaid expenses and other current assets | (23 | ) | 2 | ||||
Changes in accounts payable and other current liabilities | (71 | ) | 29 | ||||
Changes in income taxes payable | 72 | 54 | |||||
Other, net | 33 | (12 | ) | ||||
Net Cash Provided by Operating Activities | 923 | 833 | |||||
Cash Flows - Investing Activities | |||||||
Capital spending | (330 | ) | (327 | ) | |||
Proceeds from refranchising of restaurants | 49 | 83 | |||||
Acquisition of restaurants from franchisees | (1 | ) | (2 | ) | |||
Sales of property, plant and equipment | 9 | 13 | |||||
Increase in restricted cash | (300 | ) | — | ||||
Other, net | (6 | ) | (6 | ) | |||
Net Cash Used in Investing Activities | (579 | ) | (239 | ) | |||
Cash Flows - Financing Activities | |||||||
Repayments of long-term debt | (658 | ) | (8 | ) | |||
Revolving credit facilities, three months or less, net | 350 | (5 | ) | ||||
Short-term borrowings by original maturity | |||||||
More than three months - proceeds | — | — | |||||
More than three months - payments | — | — | |||||
Three months or less, net | — | (3 | ) | ||||
Repurchase shares of Common Stock | (319 | ) | (247 | ) | |||
Excess tax benefit from share-based compensation | 22 | 23 | |||||
Employee stock option proceeds | 22 | 44 | |||||
Dividends paid on Common Stock | (234 | ) | (197 | ) | |||
Other, net | (23 | ) | (19 | ) | |||
Net Cash Used in Financing Activities | (840 | ) | (412 | ) | |||
Effect of Exchange Rate on Cash and Cash Equivalents | 25 | (5 | ) | ||||
Net Increase (Decrease) in Cash and Cash Equivalents | (471 | ) | 177 | ||||
Cash and Cash Equivalents - Beginning of Period | $ | 1,426 | $ | 353 | |||
Cash and Cash Equivalents - End of Period | $ | 955 | $ | 530 |
Quarter | Year to Date | ||||||||||||||
6/11/11 | 6/12/10 | 6/11/11 | 6/12/10 | ||||||||||||
Detail of Special Items | |||||||||||||||
Loss upon refranchising of an equity market outside the U.S. | $ | — | $ | — | $ | — | $ | (7 | ) | ||||||
U.S. Refranchising gain (loss) | (8 | ) | 5 | (7 | ) | (51 | ) | ||||||||
Depreciation reduction from KFC restaurants impaired upon offer to sell | 3 | 3 | 6 | 3 | |||||||||||
Charges relating to U.S. G&A productivity initiatives and realignment of resources | — | (2 | ) | (1 | ) | (5 | ) | ||||||||
Impairment of intangibles and other costs relating to the planned sale of LJS and A&W | (1 | ) | — | (69 | ) | — | |||||||||
Total Special Items Income (Expense) | (6 | ) | 6 | (71 | ) | (60 | ) | ||||||||
Tax Benefit (Expense) on Special Items | 2 | (2 | ) | 26 | 20 | ||||||||||
Special Items Income (Expense), net of tax | $ | (4 | ) | $ | 4 | $ | (45 | ) | $ | (40 | ) | ||||
Average diluted shares outstanding | 484 | 485 | 485 | 485 | |||||||||||
Special Items diluted EPS | $ | (0.01 | ) | $ | 0.01 | $ | (0.09 | ) | $ | (0.08 | ) | ||||
Reconciliation of Operating Profit Before Special Items to Reported Operating Profit | |||||||||||||||
OPERATING PROFIT BEFORE SPECIAL ITEMS | $ | 425 | $ | 415 | $ | 891 | $ | 845 | |||||||
Special Items Income (Expense) | (6 | ) | 6 | (71 | ) | (60 | ) | ||||||||
Reported Operating Profit | $ | 419 | $ | 421 | $ | 820 | $ | 785 | |||||||
Reconciliation of EPS Before Special Items to Reported EPS | |||||||||||||||
DILUTED EPS BEFORE SPECIAL ITEMS | $ | 0.66 | $ | 0.58 | $ | 1.29 | $ | 1.17 | |||||||
Special Items EPS | (0.01 | ) | 0.01 | (0.09 | ) | (0.08 | ) | ||||||||
Reported EPS | $ | 0.65 | $ | 0.59 | $ | 1.20 | $ | 1.09 | |||||||
Reconciliation of Effective Tax Rate Before Special Items to Reported Effective Tax Rate | |||||||||||||||
EFFECTIVE TAX RATE BEFORE SPECIAL ITEMS | 16.7 | % | 23.6 | % | 22.1 | % | 24.7 | % | |||||||
Impact on Tax Rate as a result of Special Items | (0.3 | )% | 0.2 | % | (1.4 | )% | (0.7 | )% | |||||||
Reported Effective Tax Rate | 16.4 | % | 23.8 | % | 20.7 | % | 24.0 | % |
Quarter Ended 6/11/11 | China | YRI | United States | Corporate and Unallocated | Consolidated | ||||||||||||||
Total revenues | $ | 1,180 | $ | 753 | $ | 883 | $ | — | $ | 2,816 | |||||||||
Company restaurant expenses | 935 | 493 | 620 | (3 | ) | 2,045 | |||||||||||||
General and administrative expenses | 67 | 97 | 102 | 42 | 308 | ||||||||||||||
Franchise and license expenses | 1 | 11 | 22 | (1 | ) | 33 | |||||||||||||
Closures and impairment (income) expenses | 3 | 7 | 9 | — | 19 | ||||||||||||||
Refranchising (gain) loss | — | — | — | 5 | 5 | ||||||||||||||
Other (income) expense | (8 | ) | — | (2 | ) | (3 | ) | (13 | ) | ||||||||||
998 | 608 | 751 | 40 | 2,397 | |||||||||||||||
Operating Profit (loss) | $ | 182 | $ | 145 | $ | 132 | $ | (40 | ) | $ | 419 |
Quarter Ended 6/12/10 | China | YRI | United States | Corporate and Unallocated | Consolidated | ||||||||||||||
Total revenues | $ | 887 | $ | 693 | $ | 994 | $ | — | $ | 2,574 | |||||||||
Company restaurant expenses | 699 | 478 | 680 | (3 | ) | 1,854 | |||||||||||||
General and administrative expenses | 51 | 86 | 109 | 37 | 283 | ||||||||||||||
Franchise and license expenses | — | 6 | 18 | — | 24 | ||||||||||||||
Closures and impairment (income) expenses | 5 | 1 | 6 | — | 12 | ||||||||||||||
Refranchising (gain) loss | — | — | — | (10 | ) | (10 | ) | ||||||||||||
Other (income) expense | (7 | ) | — | (3 | ) | — | (10 | ) | |||||||||||
748 | 571 | 810 | 24 | 2,153 | |||||||||||||||
Operating Profit (loss) | $ | 139 | $ | 122 | $ | 184 | $ | (24 | ) | $ | 421 |
Year to Date Ended 6/11/11 | China | YRI | United States | Corporate and Unallocated | Consolidated | ||||||||||||||
Total revenues | $ | 2,086 | $ | 1,419 | $ | 1,736 | $ | — | $ | 5,241 | |||||||||
Company restaurant expenses | 1,604 | 909 | 1,229 | (6 | ) | 3,736 | |||||||||||||
General and administrative expenses | 104 | 176 | 203 | 80 | 563 | ||||||||||||||
Franchise and license expenses | 1 | 22 | 41 | (1 | ) | 63 | |||||||||||||
Closures and impairment (income) expenses | 3 | 9 | 10 | 66 | 88 | ||||||||||||||
Refranchising (gain) loss | — | — | — | 3 | 3 | ||||||||||||||
Other (income) expense | (23 | ) | — | (2 | ) | (7 | ) | (32 | ) | ||||||||||
1,689 | 1,116 | 1,481 | 135 | 4,421 | |||||||||||||||
Operating Profit (loss) | $ | 397 | $ | 303 | $ | 255 | $ | (135 | ) | $ | 820 |
Year to Date Ended 6/12/10 | China | YRI | United States | Corporate and Unallocated | Consolidated | ||||||||||||||
Total revenues | $ | 1,595 | $ | 1,397 | $ | 1,927 | $ | — | $ | 4,919 | |||||||||
Company restaurant expenses | 1,211 | 952 | 1,350 | (3 | ) | 3,510 | |||||||||||||
General and administrative expenses | 81 | 164 | 213 | 70 | 528 | ||||||||||||||
Franchise and license expenses | — | 15 | 32 | — | 47 | ||||||||||||||
Closures and impairment (income) expenses | 5 | 3 | 8 | — | 16 | ||||||||||||||
Refranchising (gain) loss | — | — | — | 53 | 53 | ||||||||||||||
Other (income) expense | (17 | ) | — | (3 | ) | — | (20 | ) | |||||||||||
1,280 | 1,134 | 1,600 | 120 | 4,134 | |||||||||||||||
Operating Profit (loss) | $ | 315 | $ | 263 | $ | 327 | $ | (120 | ) | $ | 785 |
(a) | Amounts presented as of and for the quarter and year to date ended June 11, 2011 are preliminary. |
(b) | As part of our plan to transform our U.S. business we took several measures ("the U.S. business transformation measures") in 2011 and 2010 including: continuation of our U.S. refranchising, potentially reducing our Company ownership in the U.S., excluding the LJS and A&W brands, to about 12%; and G&A productivity initiatives and realignment of resources (primarily severance and early retirement costs). We have traditionally not allocated refranchising (gains) losses for segment reporting purposes and will not allocate the costs associated with the productivity initiatives and realignment of resources to the U.S. segment. Additionally, these items have been reflected as Special Items for certain performance measures (see accompanying reconciliation to reported results). U.S. refranchising loss recorded in the year to date ended June 12, 2010 is primarily due to non-cash impairment charges related to our offers to refranchise restaurants in the U.S., principally a substantial portion of our Company operated KFCs. We have recorded the depreciation reduction for the quarter and year to date ended June 11, 2011 and the quarter ended June 12, 2010 resulting from the non-cash impairment charge related to these KFCs that remained Company stores for some or all of the quarter and year to date ended June 11, 2011 or quarter ended June 12, 2010 as a Special Item, resulting in depreciation expense in the U.S. segment results continuing to be recorded at the rate at which it was prior to the impairment charge being recorded for these KFCs while we own the restaurants. |
(c) | During the quarter ended March 19, 2011, we decided to sell the LJS and A&W brands resulting in a pre-tax non-cash write down of the brands' intangible assets totaling $66 million. The write down, as well as other charges relating to the planned sale totaling $1 million and $3 million in the quarter and year to date ended June 11, 2011, respectively, have not been allocated for segment reporting purposes and have been reflected as Special Items for certain performance reporting measures (see accompanying reconciliation to reported results). |
(d) | During the quarter ended March 20, 2010 we refranchised all of our remaining company restaurants in Taiwan, which consisted of 124 KFCs. We included in our March 20, 2010 financial statements a non-cash write off of $7 million of goodwill in determining the loss on refranchising of Taiwan. This loss did not result in a related income tax benefit, was not allocated to any segment for performance reporting purposes and has been reflected as a Special Item for certain performance measures (see accompanying reconciliation to reported results). |
(e) | Other (income) expense for the China Division primarily consists of equity income from investments in unconsolidated affiliates. |
(f) | In connection with the potential acquisition of Little Sheep Group Limited (“Little Sheep”), in which we currently own 27% of the outstanding shares, we have placed $300 million in an escrow account to demonstrate availability of funds to acquire additional shares in this business. The funds placed in escrow are restricted to the potential acquisition of Little Sheep and are included in Restricted cash in our Condensed Consolidated Balance Sheet as of June 11, 2011. |